Benefits of mixed income developments

The role of mixed income developments is to strengthen neighborhoods while improving prospects for low-income families. But, more than ever, investors are warming up to the notion that affordable housing can be a relatively low-risk venture that offers a stable rate of return.

Investors have not always been especially drawn to mixed income housing. Institutional investors have become more receptive to funding mixed-income developments. While many investors are still concerned at the prospect of financing this type of project, a considerable number have begun to accept the increase in mixed income developments.

The continued challenges to financing affordable housing aside, developers and housing advocates agree that mixed income can create varied and enduring positive impacts within a community.

Spectrum Development Solutions, a Seattle-based company focused on mixed-use, transit-oriented, and environmentally sustainable development,  has found that West Coast institutional investors are less receptive to mixing tax-credit projects with a private market-rate development.

Financing models for the mixed income developments have begun to attract investors with long-term hold philosophies. High net-worth families that aren’t looking for a quick turnaround on an investment are the most probable candidates. Development companies are also looking to partner with nonprofit organizations to create innovative financing solutions for developments open to renters with a range of incomes.

Other real estate firms, including Urban Atlantic, have demonstrated the financial viability of mixing market-rate with affordable housing in the same large-scale development. The firm first became involved with mixed-income housing in 1995 through the now-expired HOPE VI program, aimed at eradicating severely distressed public housing. The federal program was a kind of incubator that fostered innovation in the private sector and helped the company learn how to do mixed-income homeownership and rental housing.

Urban Atlantic’s recent mixed-income ventures include a $120 million renovation and conversion of two abandoned former U.S. Environmental Protection Agency office buildings that were part of an urban redevelopment area. The Sky House East and West projects, now rebranded under new names, were part of the mixed-use Waterfront Station project. They feature market-rate space at $3.25 a square foot ($34.97 per sq m), with 20 percent of the units set aside for renters making 50 percent of area median income.

Urban Atlantic is in the planning stages of an even more ambitious mixed-income project, the Parks at Walter Reed, which is a mixed-use, 66-acre (27 ha) redevelopment of the former Walter Reed Army Medical Center in Washington, D.C. The development team of Hines, Urban Atlantic, and Triden Development Group proposed 400 affordable units among the overall 2,000 units, a ratio that definitely helped in the bid process.  The team offered more affordable housing as part of the mix than any other team in the running.

While mixed-income development can be a profitable venture, the driving force for companies to invest in mixed-income developments is a strong social mission to offer suitable housing for a range of incomes, which, in turn, helps build more solid and inclusive neighborhoods. Jim Grauley, president and chief operating officer at Atlanta-based Columbia Residential, a real estate development and management firm that has built 5,000 affordable housing units across the South, said the company focuses on mixed-income work because it is both an interest of its partners and a proven success.

Some of the development companies have a clear set mission to give back to the community, attracting the team members and work partners that think in the same way. Attracting likeminded employees allows the drive for mixed income housing to prosper and develop in different projects, even as a for-profit company.

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